Opposing a European patent: will the English courts always refuse a stay pending determination by the EPO?

One consequence of the generally admirable option of opposing a European patent’s validity centrally, at the European Patent Office (EPO), is the risk of judicial inefficiency through multiple validity challenges in the national courts at the same time. Patentees therefore frequently seek to have such national challenges stayed pending the EPO’s decision.

The English courts have taken a practical approach to staying an action pending a decision on validity being reached through Opposition proceedings at the EPO. Whilst in other jurisdictions, such as Germany, a local action will be stayed until the issues are resolved by the EPO which could take 5 -10 years or more, English courts take into account the particular facts of the case and consider guidelines set out in IP Com GmbH v HTC. More often than not, English courts have refused an application for the grant of a stay pending determination by the EPO. But this is not inevitable, and a recent decision highlights how specific issues – in this case, the interplay with the regulatory process and patentee’s application for supplementary protection, may affect the outcome.

Eli Lilly v Janssen

In December 2015 Eli Lilly brought a revocation action and sought a declaration of non-infringement (DNI) against Janssen’s EP (UK) 2 305 282 (divisional patent) in an attempt to clear the path for its solanezumab product to treat patients suffering from Alzheimer’s disease. Janssen applied for an order that the proceedings be stayed, pending the decision of the EPO of the validity of the divisional patent.

In 2011, in UK proceedings brought by Eli Lilly against Janssen’s UK parent patent, Arnold J had held the parent patent to be invalid on the grounds of insufficiency.

Both the parent and the more recently granted divisional patents have been opposed by Eli Lilly at the EPO and are due to be heard at the Technical Board of Appeal (TBA) and the Opposition Division (OD) in May and June 2016 respectively.

Mrs Justice Rose considered the principles on whether to stay proceedings as set out in IPCom GmbH V HTC Europe such as:

• the wide discretion of the English courts;
• the default position being a stay if there are no other factors;
• whether a refusal of a stay will irrevocably deprive a party of the benefit which the concurrent jurisdiction of the EPO and national court is intended to confer;
• whether commercial certainty would be achieved considerably earlier in the case of UK proceedings than in the EPO;
• the length of time it will take for national proceedings and in the EPO till conclusion; and
• whether resolution of the dispute at the national level will promote settlement, for instance.

Consideration of the decision in Actavis v Pharmacia and EPO timings

Eli Lilly relied on Arnold J’s decision in Actavis v Pharmacia, in which he initially refused the grant of a stay. One of the key factors leading to that result was that the EPO proceedings had only just begun, that it was likely to take three years or longer, and in contrast, that English proceedings would be resolved in two years. Two weeks after Arnold J handed down the judgment; Pharmacia provided further undertakings that it would only seek damages of 1% of net sales in the UK during the life of the patent and not seek an injunction. Arnold J held that Pharmacia’s further undertakings substantially eliminated the commercial uncertainty and granted a stay.

In this case, Janssen argued that the facts were very different to those in Actavis and in particular, that here, EPO proceedings are well advanced and would be heard in the summer of 2016. Eli Lilly argued that even if Janssen wins on the parent patent in May 2016, this will only be in relation to insufficiency: the EPO has not yet considered Eli Lilly’s challenge on the basis of obviousness and novelty. Therefore the case may be remitted from the TBA to the OD to consider those issues.

Mrs Justice Rose agreed that the advanced stage of the EPO proceedings favour the grant of a stay and also pointed out that Eli Lilly could have commenced English proceedings challenging the divisional patent much earlier, as soon as it was granted in June 2013.

Janssen had offered undertakings to:

1. support Eli Lilly’s application to accelerate any appeal from the OD;
2. not to seek a preliminary injunction or final injunction in the UK against Eli Lilly or its licensees or customers; and
3. if validity is upheld, to seek damages on a reasonable royalty basis.

Eli Lilly argued that if there is a finding of non-infringement that would resolve the matter; it could then launch its product irrespective of the validity of Janssen’s patents. Eli Lilly reminded the courts of the IP Com factor that national courts have exclusive jurisdiction on infringement issues.

Eli Lilly also argued that the specification of the divisional patent is in all material aspects the same as the parent patent found to be invalid by Arnold J, so that his findings would create issue estoppel to prevent the divisional patent being re-litigated on any of the decided issues.

Impact of Regulatory strategies

Janssen’s parent and divisional patents will expire in November 2018. Mrs Justice Rose considered that it is very unlikely that Janssen will have its own product on the market by the end of patent expiry for the purpose of supporting a Supplementary Protection Certificate (SPC) application. However if a third party has a marketing authorisation (MA) covered by a valid claim of a basic patent, the case law suggests that Janssen will be able to rely on that third party MA to support its SPC.

Therefore, strategically, if Janssen’s patents are held to be valid and this is determined before November 2018, it would be disadvantageous to Eli Lilly to obtain an MA before the expiry of Janssen’s patents, which could be relied upon by Janssen to extend its monopoly and which Eli Lilly would have to pay a royalty on.

On this basis, Eli Lilly argued that it was imperative for Eli Lilly to have a decision as to whether its product does or does not fall within Janssen’s patent claims, as this will have an impact on when they could apply for their MA. If Eli Lilly had the DNI they could confidently apply for the MA knowing that Janssen could not then apply for its SPC based on Eli Lilly’s MA.

Mrs Justice Rose accepted the importance of this point and refused the application for the stay, thus allowing for English proceedings to go ahead.

Osborne Clarke comment

This unusual case, fought between two companies seen as originators, highlights the fact that more and more originator companies have a generic or biosimilar aspect in their business strategy. This case is also interesting as on its unusual facts, the regulatory law aspect made a key impact on the refusal of the stay of English proceedings.